The Mindset for Wealth

SBA Loans  - The Buck Stops Here. I recently approached a few banks about a business line of credit and quickly realized the real meaning of the credit markets being frozen. There is no question that banks are wary - if not fearful - of lending money right now. Yet, I know that a business line of credit is not an SBA loan, which really is business friendly, right? I beg to differ.

Let's first look at the business line of credit, which one would assume would have more rigorous credit standards. That's fine.  So what does it take to get a business line of credit? There seems to be no exception to banks requiring 100% collateral to be held against the value of the loan. In other words, if a business wants a $250K line of credit, it needs to set aside $250K in liquid assets. The obvious question, is ‘why get the loan if you have the money to set aside in the first place'? What's more, there seem to be no mitigating circumstances for established businesses (not a start up) with impeccable credit, proven revenues, solid pipeline of business, and even written commitments from business partners. I have spoken to numerous business owners who have encountered the same hurdles.

Does This Stock Market Rally Have Legs? If the stock market were a broadway show, it would be getting an standing ovation right now. Who wouldn't welcome and cheer a 38.5% move to the upside in less than five months? And we should give credit where credit is due for yesterday's record performance in the markets - better than expected earnings from AT&T, Ford, and eBay.

But what are we applauding at this point? The way I see it, AT&T is enjoying the same success as Apple - what appears to be never ending demand for the iPhone. Ford, well, it is hard not to get bailed out, restructure, and in the process, get rid of mountains of debt and look better than ever. And you would expect eBay - a bargain shopper's paradise - to do well in tough economic times. But, the good news does not stop there. Of the more than one-third of the companies that have reported their quarterly earnings, 76% have surpassed analysts' estimates (Thompson Reuters).

The last true ‘Mortgage Update' that I sent was in March, short of a few ‘rate and emergency updates'.........I thought you might appreciate an update on the last few months.

If you recall, that update was to notify you that the Fed had proactively stepped-in and rates had dropped to the 4.625%+- range.  We had a decent little stretch, where we remained between 4.625%-5%, but it would appear that we are now back in the 5.5%+ range....and will likely not see sub-5% again, anytime soon.  Last Wednesday was a big day and the rates jumped upward of ½%, in a matter of hours.  Thursday was not much better....Friday helped recover some of the losses....and, so far this week we are seeing another upward trend.  The reality is that 5.5%+- is a great rate.....no question about it...., but those of you that may have been looking for the elusive 4%, that the administration dangled, may need to re-evaluate your situation.  Now that true volatility has crept into the daily routine again, I'm skeptical on making any predictions about what the rates may do.  I think a ‘better safe, than sorry' approach is warranted.

The Cost of Financial Illiteracy 'at Work'.  The cost to employers of not providing financial education to their employees is substantial. According to the Federal Reserve, American workers spend an average of 28 hours a month researching personal financial issues. This lost productivity across an organization can be translated into real dollars - as much as $5,000 per employee per year. The collective loss across an organization can quickly have a significant negative impact on the financial performance of the company. What's more, there is little doubt that the number of employees spending time in the workplace researching financial issues and seeking guidance will increase given the magnitude of the current financial crisis. As importantly, the ‘Great Recession' is affecting everyone. People from all levels of the organization are facing financial hardship or struggling to survive day-to-day, while trying to navigate successfully to retirement.    Read more...

If you are like most people, you have your favorites when it comes to shopping - whether you are buying a car, clothes, groceries, and the like. We, as consumers, tend to be very brand loyal. It is not surprising given that companies typically spend tremendous amounts of money getting and keeping their customers.

But this year is anything but typical. With the economy hitting the brakes, unemployment on the rise, and our portfolios whittled away, most of us are thinking of ways to save our money - not spend it. Consumer product companies have been quick to respond by issuing record numbers of coupons. Coupon.com indicated that it experienced a 192% increase in the value of coupons printed from its site in March 2009, over the same time last year. And, the total value of those coupons redeemed: $57 million.

It is hard not to be encouraged by some of the positive signs in the economy recently: unemployment claims dropped by 20,000; several retailers anticipate good sales in April; mortgage rates are again near historic lows; and the stock market has been on a tear. Is this the beginning of the much needed and long awaited recovery? Has the market finally bouncing off the 'bottom'? Many folks would have you believe so. In reality, it is too soon to tell.  

One month's worth of positive signs does not make a trend. We should learn that it is always easier for the pundits to 'predict' the markets health and direction when looking in the rear view mirror. Remember, it took them about 20 months to acknowledge we were in a recession - yet everyone seemed to deny it on the way down.

April is Financial Literacy Month, What Does it Mean for You? Ok, so April is Financial Literacy Month. What does this really mean? First, it certainly highlights the growing and pressing need to provide meaningful financial education and resources to everyone - young and old. Second, it provides a opportunity to demonstrate the progress that has been made in the public and private sectors to raise awareness of the issue of financial illiteracy. And finally, this is a time that those involved in bringing about much needed change can showcase their programs and their progress in fighting this devastating epidemic. From what I have seen, it also shows what can be accomplished through public-private partnerships that share a common vision for raising the the level of financial literacy for everyone.

Day to day, Financial Literacy Month will not necessarily impact our lives, however, through time of course, we will benefit from the efforts and intiatives that will reach our schools, our communities, and hopefully our homes. In the meantime, we want to hear from you. We want this month to be about you. We want this to be a launching point for you to take the first step or steps to improving your financial health.  What are you going to start doing this month to improve your financial health and to develop The Mindset for Wealth?

The Rule of 72 is a popular way to quickly calculate how long it will take to double your money.  It's quite simple.  All you do is take 72 and divide the interest rate you are getting, to find out how many years it takes to double your money.

So if you are earning 9% on your investment, 72/9=8 years

Jump$tart Coalition Annual Awards Dinner.  As you know, April is financial literacy month. To kick things off, I was invited to the the Jump$tart Coalition 2009 Annual Awards Dinner last night in Washington, DC. This was my first time attending the event so I did not know what to expect. Much to my delight, it turned out to be the who's who in financial education and financial literacy with representation from some of the largest corporate sponsors and benefactors, Federal agencies, and non-profits. Ric Edelman, TV and radio show host and author, Emcee'd the event and infused the evening with a good dose of humor on April Fool's Day (i.e. the Dow Jones has been renamed "Down" Jones).

The awards and winners were:

How is Your Credit Score Determined? 35% Payment History (paying on time). Notice that paying on time is the single largest factor in computing your credit score. If you are likely to forget to pay your bills on time, set everything up on auto-debit! This is super important!

30% How much you owe vs. how much credit you have available. If you have $1,000 available on your Visa and you owe $1000, your credit utilization is 100% because you are using every dollar of available credit. This is bad. If you owe $1,000 but have $10,000 of credit available, your utilization rate is only 10%. This is good.